QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September
30, 2012

OR

☐

TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

COMMISSION FILE NUMBER 333-142076

IRIS BIOTECHNOLOGIES INC.

(Exact Name of small business issuer as specified
in its charter)

California

77-0506396

(State or other jurisdiction of

(I.R.S. Employer

incorporation or organization)

Identification No.)

5201 Great America Parkway, Suite 320,
Santa Clara, California 95054

(Address of principal executive offices) (Zip
Code)

Issuer’s telephone Number: (408) 867-2885

Indicate by check mark whether the issuer (1) filed
all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant
has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted
and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such files). Yes ☑
No ☐

Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of
“large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2
of the Exchange Act. (Check one):

Large accelerated filer ☐

Accelerated filer ☐

Non-accelerated filer ☐

Smaller reporting company ☑

(Do not check if a smaller

reporting company)

Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

As of November 13, 2012 the issuer had 13,000,573 outstanding shares
of Common Stock.

1

TABLE OF CONTENTS

Page

PART I

Item 1.

Financial Statements

3

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operation

16

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

20

Item 4.

Controls and Procedures

21

PART II

Item 1.

Legal Proceedings

22

Item 1A.

Risk Factors

22

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

22

Item 3.

Defaults Upon Senior Securities

22

Item 4.

Mine Safety Disclosures

22

Item 5.

Other Information

22

Item 6.

Exhibits

23

Signatures

24

2

PART I

ITEM 1. FINANCIAL STATEMENTS.

INDEX TO FINANCIAL STATEMENTS

Page

Condensed Balance Sheets as of September 30, 2012 (unaudited) and December 31, 2011

4

Unaudited Condensed Statements of Operations for the three and nine months ended September 30, 2012 and 2011 and for the period February 16, 1999 (date of inception) to September 30, 2012

Common stock issued in settlement of notes payable and accrued interest

$ -

$ -

$ 196,157

Common stock issued in settlement of accounts payable and accrued expenses

$ 22,500

$ -

$ 481,260

Convertible debt adjusted with subscription receivable

$ -

$ 34,375

$ 41,250

Beneficial conversion feature of convertible notes payable

$ -

$ -

$ 15,176

Common stock issued in exchange for intellectual property

$ -

$ -

$ 1,800,000

The accompanying notes are an integral part of these unaudited condensed financial statements

7

NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A summary of the significant accounting policies
applied in the preparation of the accompanying unaudited condensed financial statements follows.

General

The accompanying unaudited condensed financial
statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim
financial information and with the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial statements.

In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Accordingly, the results
from operations for the three and nine month periods ended September 30, 2012, are not necessarily indicative of the results that
may be expected for the year ended December 31, 2012. The unaudited condensed financial statements should be read in conjunction
with the December 31, 2011 financial statements and footnotes thereto included in the Company’s Form 10-K filed on February
28, 2012.

Business and Basis of Presentation

Iris Biotechnologies, Inc. (the “Company”,
“we”, “us”, “our”) was incorporated on February 16, 1999 under the laws of the State of California.
The Company is in the development stage as defined under Accounting Standards Codification subtopic 915-10 Development Stage Entities
and its efforts are principally devoted to developing solutions for the detection and monitoring of monogenic and complex genomic
diseases. The Company has not generated any revenue to date and consequently its operations are subject to all risks inherent in
the establishment of a new business enterprise. For the period from inception through September 30, 2012, the Company has accumulated
losses of $9,036,221.

Cash and Cash Equivalents

For purposes of the Statements of Cash Flows,
the Company considers all highly liquid debt instruments purchased with a maturity date of three months or less to be cash equivalents.

Property and Equipment

Property and equipment are stated at cost.
When retired or otherwise disposed, the related carrying value and accumulated depreciation are removed from the respective accounts
and the net difference less any amount realized from disposition, is reflected in earnings. For financial statement purposes, property
and equipment are recorded at cost and depreciated using the straight-line method over their estimated useful lives of 3 to 5 years.

Use of Estimates

The preparation of financial statements in
conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain
reported amounts and disclosures. Accordingly, actual results could differ from those estimates.

8

Long-Lived Assets

The Company follows Accounting Standards Codification
subtopic 360-10, Property, plant and equipment (“ASC 360-10”). The Statement requires that long-lived assets and certain
identifiable intangibles held and used by the Company be reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. Events relating to recoverability may include significant unfavorable
changes in business conditions, recurring losses, or a forecasted inability to achieve break-even operating results over an extended
period. The Company evaluates the recoverability of long-lived assets based upon forecasted undiscounted cash flows. Should impairment
in value be indicated, the carrying value of intangible assets will be adjusted, based on estimates of future discounted cash flows
resulting from the use and ultimate disposition of the asset. ASC 360-10 also requires assets to be disposed of be reported at
the lower of the carrying amount or the fair value less costs to sell.

Income Taxes

The Company follows Accounting Standards Codification
subtopic 740-10, Income Taxes (“ASC 740-10”) for recording the provision for income taxes. Deferred tax assets and
liabilities are computed based upon the difference between the financial statement and income tax basis of assets and liabilities
using the enacted marginal tax rate applicable when the related asset or liability is expected to be realized or settled. Deferred
income tax expenses or benefits are based on the changes in the asset or liability during each period. If available evidence suggests
that it is more likely than not that some portion or all of the deferred tax assets will not be realized, a valuation allowance
is required to reduce the deferred tax assets to the amount that is more likely than not to be realized. Future changes in such
valuation allowance are included in the provision for deferred income taxes in the period of change. Deferred income taxes may
arise from temporary differences resulting from income and expense items reported for financial accounting and tax purposes in
different periods. Deferred taxes are classified as current or non-current, depending on the classification of assets and liabilities
to which they relate. Deferred taxes arising from temporary differences that are not related to an asset or liability are classified
as current or non-current depending on the periods in which the temporary differences are expected to reverse and relate primarily
to stock based compensation basis differences. As of September 30, 2012, the Company has provided a 100% valuation against
the deferred tax benefits.

Net Loss Per Common Share

The Company computes earnings per share under
Accounting Standards Codification subtopic 260-10, Earnings Per Share (“ASC 260-10”). Net loss per common share is
computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. For all periods
presented, common stock equivalents derived from shares issuable on conversion of convertible notes and the exercise of options
and warrants are not considered in the calculation of the weighted average number of common shares outstanding because they would
be anti-dilutive, thereby decreasing the net loss per share.

Concentrations of Credit Risk

Financial instruments and related items, which
potentially subject the Company to concentrations of credit risk, consist primarily of cash, cash equivalents and related party
receivables. The Company places its cash and temporary cash investments with credit quality institutions. At times, such investments
may be in excess of the FDIC insurance limit. The Company does not have accounts receivable at September 30, 2012 and December
31, 2011.

9

Research and Development

The Company accounts for research and development
costs in accordance with the Accounting Standards Codification subtopic 730-10, Research and Development (“ASC 730-10”).
Under ASC 730-10, all research and development costs must be charged to expense as incurred. Accordingly, internal research and
development costs are expensed as incurred. Third-party research and developments costs are expensed when the contracted work has
been performed or as milestone results have been achieved. Company-sponsored research and development costs related to both present
and future products are expensed in the period incurred. The Company incurred research and development expenditures of $53,107
and $84,122 for the three and nine months ended September 30, 2012, respectively; $46,144 and $125,143 for the three and nine months
ended September 30, 2011, respectively; and $2,155,449 from the period from February 16, 1999 (date of inception) to September
30, 2012.

During the nine months ended September 30,
2011, the Company received $209,671 grant income under the federal program entitled the Qualifying Therapeutic Discovery Project.
The grant was only available to taxpayers with no more than 250 employees and covers up to 50 percent of qualified investment made
in 2009 and 2010 within the overall cap.

Liquidity and Dependency of Key Management

To date the Company has generated no revenues,
has incurred expenses, and has sustained losses. As shown in the accompanying unaudited condensed financial statements, the Company
incurred a loss of $430,500 during the nine months ended September 30, 2012. For the period from February 16, 1999 (date of inception)
through September 30, 2012, the Company has accumulated losses of $9,036,221. Consequently, its operations are subject to all risks
inherent in the establishment of a new business enterprise.

The future success or failure of the Company
is dependent primarily upon the continued efforts and financial support of Simon Chin, the Company’s Chief Executive Officer,
Chief Financial Officer and the majority shareholder. As in the past, Mr. Chin has committed to provide all necessary funding
needed to meet the Company’s financial obligations through the next twelve months and beyond.

Fair Value of Financial Instruments

Accounting Standards Codification subtopic
825-10, Financial Instruments (“ASC 825-10”) requires disclosure of the fair value of certain financial instruments.
The carrying value of cash and cash equivalents, accounts payable and accrued liabilities, as reflected in the balance sheets,
approximate fair value because of the short-term maturity of these instruments. All other significant financial assets, financial
liabilities and equity instruments of the Company are either recognized or disclosed in the unaudited condensed financial statements
together with other information relevant for making a reasonable assessment of future cash flows, interest rate risk and credit
risk. Where practicable the fair values of financial assets and financial liabilities have been determined and disclosed; otherwise
only available information pertinent to fair value has been disclosed. There were no items required to be measured at fair value
on a recurring basis in the unaudited condensed financial statement as of September 30, 2012.

The Company follows Accounting Standards Codification
subtopic 820-10, Fair Value Measurements and Disclosures (“ASC 820-10”) and Accounting Standards Codification subtopic
825-10, Financial Instruments (“ASC 825-10”), which permits entities to choose to measure many financial instruments
and certain other items at fair value. Neither of these statements had an impact on the Company’s financial position, results
of operations nor cash flows.

10

Stock Based Compensation

The Company follows the fair value recognition
provisions of Accounting Standards Codification subtopic 718-10, Compensation (“ASC 718-10”) using the modified-prospective
transition method. Under this transition method, stock-based compensation expense was recognized in the financial statements for
granted, modified, or settled stock options. Compensation expense recognized included the estimated expense for stock options granted
on and subsequent to January 1, 2006, based on the grant date fair value estimated in accordance with the provisions of ASC 718-10,
and the estimated expense for the portion vesting in the period for options granted prior to, but not vested as of January 1, 2006,
based on the grant date fair value estimated in accordance with the original provisions of ASC 718-10. Results for prior periods
have not been restated, as provided for under the modified-prospective method.

ASC 718-10 requires forfeitures to be estimated
at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. In the
Company’s pro forma information required under ASC 718- 10 for the periods prior to fiscal 2006, the Company accounted for
forfeitures as they occurred.

Upon adoption of ASC 718-10, the Company is
using the Black-Scholes option-pricing model as its method of valuation for share-based awards granted beginning in fiscal 2006,
which was also previously used for the Company’s pro forma information required under ASC 718-10 The Company’s determination
of fair value of share-based payment awards on the date of grant using an option-pricing model is affected by the Company’s
stock price as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but
are not limited to the Company’s expected stock price volatility over the term of the awards, and certain other market variables
such as the risk free interest rate.

During the nine months ended September 30,
2012 and 2011, the Company granted 85,000 and 285,000 employee stock options, respectively. The fair values of issued vesting options
were $19,714 and $101,404 for the three and nine months ended September 30, 2012, respectively; and $48,287 and $138,202 for the
three and nine months ended September 30, 2011, respectively.

Recent Accounting Pronouncements

There were various other updates recently issued,
most of which represented technical corrections to the accounting literature or application to specific industries and are not
expected to a have a material impact on the Company’s financial position, results of operations or cash flows.

NOTE 2 - PROPERTY, PLANT, AND EQUIPMENT

Property, plant and equipment at September
30, 2012 and December 31, 2011 are as follows:

September 30, 2012

(unaudited)

December 31, 2011

Computer equipment

$

67,983

$

67,983

Office equipment

1,728

1,728

Furniture and fixtures

3,586

3,586

Manufacturing equipment

165,503

165,503

238,800

238,800

Less: accumulated depreciation

(227,589

)

(215,844

)

$

11,211

$

22,956

11

Depreciation expense charged to operations
was $3,438 and $11,745 for the three and nine months ended September 30, 2012, respectively; and $3,970 and $11,787 for the three
and nine months ended September 30, 2011, respectively.

NOTE 3 - LONG TERM CONVERTIBLE NOTE PAYABLE

Long-term debt at September 30, 2012 and December 31, 2011 are as
follows:

September 30, 2012 (unaudited)

December 31,

2011

Note payables

$

45,000

$

—

Total

45,000

—

Less: current portion

—

—

Long term portion

$

45,000

$

—

On June 21, 2012, the Company issued a $20,000
note to an unrelated party, unsecured and bearing an interest rate of 7.5% per annum, due two years from date of issuance. The
note is convertible into the Company’s common stock at a conversion rate of $1.00 per share.

On June 22, 2012, the Company issued a $15,000
note to an unrelated party, unsecured and bearing an interest rate of 7.5% per annum, due two years from date of issuance. The
note is convertible into the Company’s common stock at a conversion rate of $1.00 per share.

On September 12, 2012, the Company issued a
$10,000 note to an unrelated party, unsecured and bearing an interest rate of 7.5% per annum, due two years from date of issuance.
The note is convertible into the Company’s common stock at a conversion rate of $1.00 per share.

NOTE 4 - STOCKHOLDER EQUITY

Preferred stock

The Company is authorized to issue 5,000,000
shares of no par preferred stock. From date of inception through September 30, 2012, the Company has not issued any preferred shares.

Common stock

The Company is authorized to issue 20,000,000
shares of no par value common stock. As of September 30, 2012 and December 31, 2011 the Company has 12,872,073 and 12,605,573 shares
of common stock issued and outstanding, respectively.

During the nine months ended September 30,
2012, the Company issued an aggregate of 176,500 shares of common stock for services and accruals in the amount of $105,101 and
90,000 shares of common stock for cash in the amount of $90,000.

12

NOTE 5 – WARRANTS AND OPTIONS

Warrants

The following table summarizes the changes
in warrants outstanding and related prices for the shares of the Company’s common stock issued to shareholders at September
30, 2012:

Exercise

Price

Number

Outstanding

Warrants Outstanding

Weighted Average

Remaining Contractual

Life (years)

Weighted

Average

Exercise price

Number

Exercisable

Warrants Exercisable

Weighted

Average

Exercise Price

$

0.13

40,000

1.72

$

0.13

40,000

$

0.13

2.25

23,629

0.31

2.25

23,629

2.25

63,629

63,629

Transactions involving the Company’s warrant issuance are
summarized as follows:

Number of

Shares

Weighted

Average

Price Per Share

Outstanding at December 31, 2010

95,029

$

1.29

Issued

—

—

Exercised

—

—

Expired

(17,500

)

(2.00

)

Outstanding at December 31, 2011

77,529

$

1.11

Issued

—

—

Exercised

—

—

Expired

(13,900

)

(2.00

)

Outstanding at September 30, 2012

63,629

$

0.92

Options

Employee Options

The following table summarizes the changes
in options outstanding and the related prices for the shares of the Company’s common stock issued to employees under a stock
option plan at September 30, 2012:

On July 11, 2012, the Company granted 85,000
employee stock options with an exercise price of $1.00 vesting over four years and expiring ten years from issuance. The fair value
(as determined as described below) of $33,358 is charged ratably over the vesting term of the options.

The fair value of these stock options granted
and the significant assumptions used to determine those fair values, using a Black-Scholes option-pricing model are as follows:

Significant assumptions:

Risk-free interest rate at grant date

1.54

%

Expected stock price volatility

157.05

%

Expected dividend payout

—

Expected option life-years (a)

10

__________________________

(a)The expected option life is based on contractual expiration dates

The fair values of issued vesting options were
$19,714 and $94,732 for the three and nine months ended September 30, 2012, respectively; and $41,439 and $115,597 for the three
and nine months ended September 30, 2011, respectively.

Non-employee options

The following table summarizes the changes
in options outstanding and the related prices for the shares of the Company’s common stock issued to non-employees under
a stock option plan at September 30, 2012:

The fair value of the vested portion of previously
granted non-employee options of $Nil and $6,672 was charged during the three and nine months ended September 30, 2012, respectively;
and $6,848 and $22,605 for the three and nine months ended September 30, 2011, respectively.

NOTE 6 - COMMITMENTS AND CONTINGENCIES

Litigation

On May 16, 2012, a complaint was filed against
the Company in Superior Court of California, County of Humboldt by Kenneth Stiver. The complaint alleges that the Company
has not paid Mr. Stiver for services rendered and is seeking a total sum of $86,000 plus reimbursement of expenses for $9,898.
The Company denies all allegations against it and is vigorously defending itself against this complaint, and accordingly no liability
has been recognized as of September 30, 2012.

On August 20, 2012, the Company filed a motion
to allow late filing of a malpractice claim against Heller Ehrman LLP, discovered after claims bar date, in the United States Bankruptcy
Court, Northern District of California, San Francisco Division. The first hearing was held on November 1, 2012 before the Honorable
Dennis Montali, United States Bankruptcy Judge at San Francisco, California.

We are not a party to any additional pending
legal proceedings, nor is our property the subject of a pending legal proceeding, that is not in the ordinary course of business
or otherwise material to the financial condition of our business.

NOTE 7 - SUBSEQUENT EVENTS

In the month of October 2012, the Company issued
16,000 shares of its common stock for services rendered for the months of September and October 2012, 37,500 shares of its common
stock for services rendered for the previous three months and 35,000 shares for the sale of its common stock, of which 30,000 shares
were for the common stock subscription received during the third quarter ended September 30, 2012.

In the month of November 2012, the Company
issued 40,000 shares for the sale of its common stock.

15

ITEM 2. MANAGEMENT’S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Forward-Looking Statements

The information in this
report contains forward-looking statements. All statements other than statements of historical fact made in this report are forward
looking. In particular, the statements herein regarding industry prospects and future results of operations or financial position
are forward-looking statements. These forward-looking statements can be identified by the use of words such as “believes,”
“estimates,” “could,” “possibly,” “probably,” anticipates,” “projects,”
“expects,” “may,” “will,” or “should” or other variations or similar words. No
assurances can be given that the future results anticipated by the forward-looking statements will be achieved. Forward-looking
statements reflect management’s current expectations and are inherently uncertain. Our actual results may differ significantly
from management’s expectations.

The following discussion
and analysis should be read in conjunction with our unaudited condensed financial statements, included herewith. This discussion
should not be construed to imply that the results discussed herein will necessarily continue into the future, or that any conclusion
reached herein will necessarily be indicative of actual operating results in the future. Such discussion represents only the best
present assessment of our management.

Overview

Since inception on February
16, 1999 through September 30, 2012, we have sustained cumulative net losses of $9,036,221. Our losses have resulted primarily
from research and development expenses, patent costs and legal and accounting expenses. From inception through September 30, 2012,
we have not generated any revenue from operations. We expect to incur additional losses to perform further research and development
activities. We have sufficient cash to operate for one year at the current burn rate with our CEO’s agreement to fund our
operations. In order to accelerate our product introduction and to grow dynamically, we will need to raise additional funds. We
do not currently have any commercial products. With additional funding, we expect to launch our nano-biochip products in less than
a year.

During the past two years,
we have spent less than $10,000 for public relations. Due to the severe recession we felt that it was prudent to spend investor
dollars on designing and building an advanced Nano-Biochip making system, streamlining the automated patient sample processing
protocols and product tracking system, and interacting with physicians and patients to demonstrate the usefulness of our BioWindows™
medical informatics system. We have an extensive pipeline of disease chips including a BreastCancerChip™, ColonCancerChip™,
NeuroChip™, CardioChip™, ComprehensiveCancerChip™, and MetabolicChip™.

We have been in discussions
with various entities in regard to launching our products in the US and abroad. We have also had discussions with equipment financing
sources with respect to building or buying additional equipment, which would allow us to expand our manufacturing capacity. Under
the US Qualifying Therapeutic Discovery Project (QTDP) Program, the maximum amount of a grant application was $5 million, but the
maximum amount that the government actually gave for any grant was $245,000. In 2011, we were awarded the bulk of $245,000 in recognition
of our patented Nano-Biochip™ and BioWindows™ Medical Informatics System for optimizing personalized and targeted medical
treatment.

The selection criteria includes
a company’s ability to diagnose diseases or conditions; to determine molecular factors related to diseases or conditions
by developing molecular diagnostic guided therapeutic decisions; or to develop a product, process, or technology to further the
delivery or administration of therapeutics. The award was given to projects that show reasonable potential to result in new therapies
to treat areas of unmet medical needs or to prevent, detect or treat chronic or acute diseases and conditions; to reduce long-term
health care costs in the U.S.; or to significantly advance the goal of curing cancer within the next 30 years.

16

There are some risks with respect
to clinical testing, regulatory approval and review cycles and uncertainty of the costs. Net positive cash inflows from any products
developed may take several years to achieve. Management plans to continue financing operations with a combination of equity issuances
and debt arrangements. If adequate funds are not available, we may be required to delay, reduce the scope of, or eliminate our
research or development programs, or cease operations.

History

We were incorporated in
the State of California on February 16, 1999 and planned to sell theranostic (choosing therapy based upon personalized diagnostic
results) products and services in the medical field. In an effort to develop that business, we set up operations in two locations
in California - Headquarters in Santa Clara and Laboratory in San Leandro.

Beginning on March 11,
1999, Simon Chin, MBA, our founder, President and CEO, Secretary and principal shareholder, entered into Common Stock Purchase
Agreements with various companies, investment groups and private individuals. On March 1, 2003, Daniel Farnum, M.D., an owner of
Humboldt Orthopedics and a key shareholder, and Grace Osborne, MBA, President of GCO Recruiting, joined Mr. Chin on our board of
directors. On April 9, 2003, the board approved a 2 for 1 stock split, changed the authorized shares of common stock from 10 million
to 20 million, and the authorized preferred stock remained at 5 million shares.

Plan of Operation

We are a life science company
focused on the development and commercialization of Nano-BiochipsTM and an artificial intelligence system to assist in establishing
the foundation for personalized medicine, which will initially be utilized in the treatment of breast cancer. The Nano-BiochipsTM
have the ability to quickly and very accurately analyze the activity of multiple genes involved in a specific disease. Our manufacturing
system has the capability to produce a variety of chips with a choice of mRNA, microRNA, protein, or other biomarker probes for
the diagnosis and prognosis of many diseases. Although we may market our products as CLIA laboratory tests, we are designing them
to be approved by the FDA, which can then be used in any certified laboratory. Starting at the point of a breast biopsy diagnosis
of cancer, the Nano-Biochip and informatics program are designed to enable a treating physician to quickly prescribe a personalized
treatment regimen that will have the greatest probability of success for each patient’s particular type of cancer. Our product
platform is expected to lead to more effective diagnosis and treatment not only for patients with breast cancer, but also for those
with neurological disorders, heart disease, diabetes and other gene-related metabolic problems.

Product Research and Development

We anticipate spending,
in order to accelerate our growth, which is contingent upon raising additional funds, more than $2 million for product research
and development activities related to our anticipated product launch during the next twelve months.

Acquisition of Plant and Equipment and Other
Assets

We do not anticipate the
sale of any material property, plant or equipment during the next 12 months. We do not anticipate the acquisition of any material
property, plant or equipment during the next 12 months, unless we raise additional funds to accelerate our growth to fulfill the
unmet needs of a large, growing market.

17

Number of Employees

From our inception through
the period ended September 30, 2012, we have relied on the services of full time and part-time employees as well as outside consultants.
As of November 12, 2012, we have 5 full time and 9 part-time employees and consultants. In order for us to attract and retain quality
personnel, we anticipate we will have to offer competitive salaries to future employees. We anticipate that it may become desirable
to add additional full and or part time employees to discharge certain critical functions during the next 12 months. This projected
increase in personnel is dependent upon our ability to generate revenues and obtain sources of financing. There is no guarantee
that we will be successful in raising the funds required or generating revenues sufficient to fund the projected increase in the
number of employees. As we continue to expand, we will incur additional cost for personnel.

Results of Operations

We are in the development
stage and to date have not generated revenues. The risks specifically discussed are not the only factors that could affect future
performance and results. In addition to the discussion in this prospectus concerning us, our business and our operations contain
forward-looking statements. Such forward-looking statements are necessarily speculative and there are certain risks and uncertainties
that could cause actual events or results to differ materially from those referred to in such forward-looking statements. We do
not have a policy of updating or revising forward-looking statements and thus it should not be assumed that silence by our Management
over time means that actual events or results are occurring as estimated in the forward-looking statements herein.

As a development stage
company, we have yet to earn revenues from operations. We may experience fluctuations in operating results in future periods due
to a variety of factors, including our ability to obtain additional financing in a timely manner and on terms favorable to us,
our ability to successfully develop our business model, the amount and timing of operating costs and capital expenditures relating
to the expansion of our business, operations and infrastructure and the implementation of marketing programs, key agreements, and
strategic alliances, and general economic conditions specific to our industry.

As a result of limited
capital resources and no revenues from operations since inception, we have relied on the issuance of equity securities to employees
and non-employees (consultants) in exchange for services. Our management enters into equity compensation agreements with non-employees
if it is in our best interest under terms and conditions consistent with the requirements of Accounting Standards Codification
Subtopic 718-10 Compensation (ASC 718- 10). In order to conserve our limited operating capital resources, we anticipate continuing
to compensate non-employees with equity for services during the next twelve months. This policy may have a material effect on our
results of operations during the next twelve months.

Three Months Ended September 30, 2012 Compared to Three Months
Ended September 30, 2011

Revenues

We have generated no operating
revenues from operations since our inception.

Costs and Expenses

Since our inception through
September 30, 2012, we have incurred cumulative losses of $9,036,221. In addition, a significant part of the overall remaining
costs are associated principally with equity-based compensation to employees and consultants, research and development costs and
professional services rendered.

18

Selling, general and administrative
(“SG&A”) expenses decreased by $4,470 from $106,863 for the three months ended September 30, 2011 to $102,393
for the three months ended September 30, 2012. SG&A expenses consisted of accounting, legal, consulting, public relations,
startup and organizational expenses. SG&A expenses also included non-cash charges from the issuance of stock, warrants and
stock options in the amounts of $42,474 for the three months ended September 30, 2012 and $90,669 for the three months ended September
30, 2011, a period to period decrease of $48,195. The remaining SG&A expenses, which required cash amounted to $59,919 and
$16,194 for the three months ended September 30, 2012 and 2011, respectively. We used stock in lieu of cash to conserve our cash
resources.

Research and development
costs increased from $46,144 for the three months ended September 30, 2011 to $53,107 for the three months ended September 30,
2012.

As a result of the above-mentioned
expenses, net losses decreased slightly from $159,821 for the three months ended September 30, 2011 to a net loss of $159,575 for
the three months ended September 30, 2012.

We have generated no operating
revenues from operations since our inception.

Costs and Expenses

Since our inception through
September 30, 2012, we have incurred cumulative losses of $9,036,221. In addition, a significant part of the overall remaining
costs are associated principally with equity-based compensation to employees and consultants, research and development costs and
professional services rendered.

Selling, general and administrative
(“SG&A”) expenses decreased by $2,266 from $336,200 for the nine months ended September 30, 2011 to $333,934
for the nine months ended September 30, 2012. SG&A expenses consisted of accounting, legal, consulting, public relations, startup
and organizational expenses. SG&A expenses also included non-cash charges from the issuance of stock, warrants and stock options
in the amounts of $184,005 for the nine months ended September 30, 2012 and $249,000 for the nine months ended September 30, 2011,
a period to period decrease of $64,995. The remaining SG&A expenses, which required cash amounted to $149,929 and $87,200 for
the nine months ended September 30, 2012 and 2011, respectively. We used stock in lieu of cash to conserve our cash resources.

Research and development
costs decreased from $125,143 for the nine months ended September 30, 2011 to $84,122 for the nine months ended September 30, 2012.

During the nine months
ended September 30, 2011, we received $209,671 grant income from the U. S. Government for research previously done as compared
to Nil for 2012.

As a result of the above-mentioned
expenses, net losses increased from $271,808 for the nine months ended September 30, 2011 to a net loss of $430,500 for the nine
months ended September 30, 2012.

Liquidity and Capital Resources

As of September 30, 2012,
we had a working capital deficit of $38,323 as compared to working capital of $8,927 as of December 31, 2011. Our cash position
was $6,040 as of September 30, 2012 compared to $43,729 as of December 31, 2011. From our inception to September 30, 2012 we have
incurred an operating cash flow deficit of $3,276,388, which has been principally financed through the private placement of our
common stock, advances from related parties, issuance of notes payable and financial support of the Company's Chief Executive Officer
(CEO). As of September 30, 2012, we had $45,000 of long-term debt.

19

We
expect to continue to incur additional losses and negative cash flows from operating activities for the next twelve months.

Our available working capital
and capital requirements will depend upon numerous factors, including progress of our research and development programs, our progress
in and the cost of pre-clinical and clinical testing, the timing and cost of obtaining regulatory approvals, the cost of filing
and prosecuting patent claims and other intellectual property rights, completing technological and market developments, current
and future licensing relationships, the status of our competitors, and our ability to establish collaborative arrangements with
other organizations .

Our continued operations
will depend on whether we are able to raise additional funds through various potential sources, such as equity and debt financing,
collaborative and licensing agreements, strategic alliances, and our ability to realize the full potential of our technology in
development. Such additional funds may not become available on acceptable terms, if at all, and there can be no assurance that
any additional funding that we do obtain will be sufficient to meet our needs in the long term. Through October 2012, virtually
all of our financing has been through private placements of common stock, convertible notes and warrants. We intend to continue
to fund operations from cash on-hand and through the similar sources of capital previously described for the foreseeable future.
We can give no assurances that any additional capital that we are able to obtain will be sufficient to meet our needs. We believe
that we will continue to incur net losses and negative cash flows from operating activities for the next two years. Based on the
resources available to us, we have sufficient cash to operate for one year at the current burn rate with our CEO’s agreement
to continue fund our operations. We may need additional financing thereafter.

Off-Balance Sheet Arrangements

We do not have any off-balance
sheet arrangements.

Inflation

It is our opinion that
inflation has not had a material effect on our operations.

Critical Accounting Policies

Our unaudited condensed
financial statements are prepared in accordance with accounting principles generally accepted in the United States of America,
which requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

The following accounting
policies are critical in fully understanding and evaluating our reported financial results:

Accounting for Stock-Based Compensation

We account for our stock
options and warrants using the fair value method promulgated by Accounting Standards Codification subtopic 718-10, Compensation
(“ASC 718-10”) which addresses the accounting for transactions in which an entity exchanges its equity instruments
for goods or services. Therefore, our results include non-cash compensation expense as a result of the issuance of stock options
and warrants and we expect to record additional non-cash compensation expense in the future.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK

Not applicable

20

ITEM 4. CONTROLS AND PROCEDURES.

Disclosure Controls and Procedures

We evaluated the design
and operation of our disclosure controls and procedures to determine whether they are effective in ensuring that we disclose required
information in a timely manner and in accordance with the Securities Exchange Act of 1934 (the "Exchange Act") and the
rules and regulations promulgated by the SEC. The executive who serves as our President and Chief Financial Officer
has participated in such evaluation. Management concluded, based on such review, that our disclosure controls and procedures,
as defined by Exchange Act Rules 13a-15(e) and 15d-15(e), were not effective as of the end of the period covered by this Quarterly
Report on Form 10-Q. The ineffectiveness of these disclosure controls is due to the matters described below in "Internal
Control over Financial Reporting."

Limitations on the Effectiveness of Controls

We believe that a control
system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the control system are
met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within
a company have been detected. Our disclosure controls and procedures are designed to provide a reasonable assurance
of achieving their objectives and our President and Chief Financial Officer has concluded that such controls and procedures are
not effective at the "reasonable assurance" level. The ineffectiveness of these disclosure controls is due
to the matters described below in "Internal Control over Financial Reporting."

Internal Control over Financial Reporting

Our management is responsible
for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting
is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act. Management assessed the effectiveness of the internal
controls over financial reporting as of September 30, 2012, using the framework set forth in Internal Control-Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based upon this assessment, our management concluded
that, as of September 30, 2012, the internal controls over financial reporting were not effective. The reportable conditions and
material weakness relate to a limited segregation of duties at the Company. Segregation of duties within our company is limited
due to the small number of employees that are assigned to positions that involve the processing of financial information. Specifically,
certain key financial accounting and reporting personnel had an expansive scope of duties that allowed for the creation, review,
approval and processing of financial data without independent review and authorization for preparation of schedules and resulting
financial statements and related disclosures. We did not maintain a sufficient depth of personnel with an appropriate level of
accounting knowledge, experience and training in the selection and application of Generally Accepted Accounting Principles commensurate
with financial reporting requirements. Accordingly, we place undue reliance on the finance team at corporate headquarters, specifically
the executive who is our President and Chief Financial Officer along with outside accounting consulting. Accordingly, management
has determined that this control deficiency constitutes a material weakness. This material weakness could result in material misstatements
of significant accounts and disclosures that would result in a material misstatement to our interim or annual financial statements
that would not be prevented or detected. In addition, due to limited staffing, the Company is not always able to detect minor errors
or omissions in reporting.

Going forward, management
anticipates that additional staff will be necessary to mitigate these weaknesses, as well as to implement other planned improvements. Additional
staff will enable us to document and apply transactional and periodic controls procedures, permit a better review and approval
process and improve quality of financial reporting. However, the potential addition of new staff is contingent on obtaining
additional financing, and there is no assurance that the Company will be able to do so.

21

Changes in Internal Control Over financial
Reporting

During the three months
ended September 30, 2012, there were no changes to our internal control over financial reporting that has materially affected,
or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

On August 20, 2012, we filed a motion to allow
late filing of a malpractice claim against Heller Ehrman LLP, discovered after claims bar date, in the United States Bankruptcy
Court, Northern District of California, San Francisco Division. The first hearing was held on November 1, 2012 before the Honorable
Dennis Montali, United States Bankruptcy Judge at San Francisco, California.

On May 16, 2012, a complaint
was filed against us in Superior Court of California, County of Humboldt by Kenneth Stiver. The complaint alleges that we
have not paid Mr. Stiver for services rendered and is seeking a total sum of $86,000 plus reimbursement of expenses for $9,898.
We deny all allegations against us and we are vigorously defending ourself against this complaint, and accordingly no liability
has been recognized as of September 30, 2012.

We are not a party to any
additional pending legal proceedings, nor is our property the subject of a pending legal proceeding, that is not in the ordinary
course of business or otherwise material to the financial condition of our business.

ITEM 1A. RISK FACTORS

There have been no material
changes in our risk factors from those disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended
December 31, 2011.

ITEM
2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

During the three months
ended September 30, 2012, we issued 53,500 shares of common stock to consultants for services rendered and accruals in the amount
of $22,761. In connection with the issuance of such shares, we relied on the exemption from registration provided by Section 4(2)
of the Securities Act of 1933, as amended.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4. MINE SAFETY DISCLOSURES

None

ITEM 5. OTHER INFORMATION

None

22

ITEM 6. EXHIBITS.

Exhibit

Number

Description of Exhibit

31.1

Certifications required by Rule 13a-14, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1

Certification of Chief Executive Officer and Principal Accounting Officer pursuant to 18 U.S.C.§ 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS

XBRL Instance Document

101.SCH

XBRL Taxonomy Extension Schema Document

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

XBRL Taxonomy Extension Label Linkbase Document

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document

23

SIGNATURES

Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

Site Links

Based on public records. Inadvertent errors are possible. Getfilings.com does not guarantee the accuracy or timeliness of any information on this site. Use at your own risk.
This website is not associated with the SEC.